what is sensex in share market

Sensex refers to "Sensitivity Index" and is generally associated with the stock market indices.
There are currently two major stock exchanges in India, The Bombay Stock exchange (BSE) and
The National Stock Exchange (NSE).

The BSE Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator
of all the major companies of the NSE.

If the Sensex goes up, it means that the prices of the stocks of most of the companies under the
BSE Sensex (30 companies) have gone up. If the Sensex goes down, this tells you that the stock
price of most of the major stocks on the BSE have gone down.

Today the BSE Sensex constitutes of the following companies:

Company Name (Industry)

1. ACC (Cement - Major)

2. Bharti Airtel (Telecommunications - Service)
3. BHEL (Engineering - Heavy)
4. DLF (Construction & Contracting - Real Estate)
5. Grasim (Diversified)
6. HDFC Bank (Banks - Private Sector)
7. HDFC (Finance - Housing)
8. Hindalco (Aluminium)
9. Hindustan Unilever Ltd (Personal Care)
10. ICICI Bank (Banks - Private Sector)
11. Infosys Ltd (Computers - Software)
12. ITC Ltd(Cigarettes)
13. Jaiprakash Associates (Construction, Real Estate, Cement etc.)
14. Larsen & Toubro (Construction, Diversified)
15. Mahindra and Mahindra (Auto - Cars & Jeeps)
16. Maruti Suzuki (Auto - Cars & Jeeps)
17. NTPC (Power - Generation/Distribution)
18. ONGC (Oil Drilling And Exploration)
19. Ranbaxy Labs (Pharmaceuticals)
20. Reliance Communications (Telecommunications - Service)
21. Reliance Industries Limited (Diversified)
22. Reliance Infrastructure (Power - Generation/Distribution)
23. State Bank of India (Banks - Public Sector)
24. Sterlite Industries (Metals - Non Ferrous)
25. Sun Pharma (Pharmaceuticals)
26. Tata Motors (Auto - LCVs/HCVs)
27. Tata Power (Power - Generation/Distribution)
28. Tata Steel (Steel - Large)
 29. TCS (Computers - Software)
30. Wipro (Computers – Software

Technical Analysis of Indian stock market

BSE Sensex Index
The BSE SENSEX is not only scientifically designed but also based on globally accepted
construction and review methodology. First compiled in 1986, SENSEX is a basket of 30
constituent stocks representing a sample of large, liquid and representative companies. The base
year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both
domestic and international markets through print as well as electronic media.

Technical Analysis of Indian stock market BSE Sensex Index

The Index was initially calculated based on the "Full Market Capitalization" methodology but
was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float
Market Capitalization" methodology of index construction is regarded as an industry best
practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use
the Free-float methodology.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of
the Indian stock market. As the oldest index in the country, it provides the time series data over a
fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years
become one of the most prominent brands in the country.

Technical Analysis of Indian stock market BSE Sensex Index

Q.2 What are the objectives of SENSEX? 

The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among
individual investors, institutional investors, foreign investors and fund managers. The objectives
of the index are: 

To measure market movements 

Given its long history and its wide acceptance, no other index matches the SENSEX in reflecting
market movements and sentiments. SENSEX is widely used to describe the mood in the Indian
Stock markets. 

Benchmark for funds performance 

The inclusion of blue chip companies and the wide and balanced industry representation in the
SENSEX makes it the ideal benchmark for fund managers to compare the performance of their
funds. 
For index based derivative products 
Institutional investors, money managers and small investors all refer to the SENSEX for their
specific purposes The SENSEX is in effect the proxy for the Indian stock markets. The country's
first derivative product i.e. Index-Futures was launched on SENSEX.

How is SENSEX calculated? 

SENSEX is calculated using a "Market Capitalization-Weighted" methodology. As per this
methodology, the level of index at any point of time reflects the total market value of 30
component stocks relative to a base period. (The market capitalization of a company is
determined by multiplying the price of its stock by the number of shares issued by the company).
An index of a set of a combined variables (such as price and number of shares) is commonly
referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the
results of this calculation in order to make the value easier to work with and track over time. It is
much easier to graph a chart based on indexed values than one based on actual values. 

The base period of SENSEX is 1978-79. The actual total market value of the stocks in the Index
during the base period has been set equal to an indexed value of 100. This is often indicated by
the notation 1978-79=100. The formula used to calculate the Index is fairly straightforward.
However, the calculation of the adjustments to the Index (commonly called Index maintenance)
is more complex. 

The calculation of SENSEX involves dividing the total market capitalization of 30 companies in
the Index by a number called the Index Divisor. The Divisor is the only link to the original base
period value of the SENSEX. It keeps the Index comparable over time and is the adjustment
point for all Index maintenance adjustments. During market hours, prices of the index scrips, at
which latest trades are executed, are used by the trading system to calculate SENSEX every 15
seconds and disseminated in real time.

How is the closing Index calculated? 

The closing SENSEX is computed taking the weighted average of all the trades on SENSEX
constituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded in
the last 15 minutes, the last traded price is taken for computation of the Index closure. If a
SENSEX constituent has not traded at all in a day, then its last day's closing price is taken for
computation of Index closure. The use of Index Closure Algorithm prevents any intentional
manipulation of the closing index value.

How is the routine maintenance of SENSEX carried out? 

One of the important aspects of maintaining continuity with the past is to update the base year
average. The base year value adjustment ensures that additional issue of capital and other
corporate announcements like bonus etc. do not destroy the value of the index. The beauty of
maintenance lies in the fact that adjustments for corporate actions in the Index should not per se
affect the index values. 

The Index Cell of the Exchange does the day-to-day maintenance of the index within the broad
index policy framework set by the Index Committee. The Index Cell takes special care to ensure
that SENSEX and all the other BSE indices maintain their benchmark properties by striking a
delicate balance between high turnover in Index scrips and its representative character. The
Index Committee of the Exchange has experts from different field of finance related to the
capital markets. They include Academicians, Fund-managers from leading Mutual Funds,
Finance - Journalists, Market Participants, Independent Governing Board members, and
Exchange administration.